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Greek stock market tumbles to 14-year low

The bourse’s general index sank below the 1,000-point mark, closing down 6 per cent at 998.24 — the lowest level since January 1997.

Mon., Aug. 8, 2011

ATHENS, GREECE—Greece on Monday banned short selling on the stock market for two months, after shares on the Athens Stock Exchange plunged to their lowest level in more than 14 years as financial markets were buffeted by worries over the U.S. economy following a downgrade of the country’s debt.

The bourse’s general index sank below the 1,000-point mark, closing down 6 per cent at 998.24 — the lowest level since January 1997. Less than an hour after the stock exchange closed, the Capital Market Commission imposed the two-month ban on short-selling, which comes into effect as of Tuesday.

Short selling, a way of betting a financial asset will fall in price, typically involves traders selling borrowed shares in the hope of buying them cheaper later and profiting on the difference.

The commission said in a statement it took the decision “after taking into account the exceptional circumstances prevailing in the Greek market.”

It had imposed another two-month suspension of short-selling in April 2010, after a six day losing streak on the stock exchange. That ban had followed a downgrade of Greece’s credit rating.

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Greece became the first EU country to seek an international bailout last year, when it saw its borrowing costs spiral out of control as investors doubted it could repay its debts. International creditors agreed last month to extend it a second bailout.

The financial crisis has also affected other eurozone countries, with Portugal and Ireland also receiving bailouts.

On Monday, Europe’s central bank is widely thought to have begun buying the depressed-bonds of Italy and Spain to calm investor fears that the two countries won’t be able to pay their debts.

Though that bond-buying effort appears to have worked in the short-term by reducing the two countries’ borrowing costs, stock markets around the world have been in retreat as investors respond to Standard & Poor’s momentous downgrade of the U.S.’s rating.

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